3. Lakeshore Company allocates overhead using direct labour-hours. For 2020, the estimated and actual labour-hours were 216,000 and 185,000 respectively, and the predetermined overhead rate used to apply overhead for the year was $26.10 per direct labour-hour. The manufacturing overhead control T-account showed a credit balance of $202,450 at the end of the year, and this balance was disposed of at the end of the year by closing it to cost of goods sold. 1. Was manufacturing overhead under- or overapplied? 2. Compute the actual overhead amount incurred over the year. 3. How will end-of-period disposal of this amount impact net income? a)Increase b)Decrease
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
3.
Lakeshore Company allocates overhead using direct labour-hours. For 2020, the estimated and actual labour-hours were 216,000 and 185,000 respectively, and the predetermined overhead rate used to apply overhead for the year was $26.10 per direct labour-hour. The manufacturing overhead control T-account showed a credit balance of $202,450 at the end of the year, and this balance was disposed of at the end of the year by closing it to cost of goods sold.
1. Was manufacturing overhead under- or overapplied?
2. Compute the actual overhead amount incurred over the year.
3. How will end-of-period disposal of this amount impact net income?
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